How to Pay Off Debt and Save For Retirement

pay off debt and save for retirement 2

As you age, planning for retirement becomes more important with each passing year. For those who are dedicated to having enough cash on hand to cover housing and living expenses after retiring from the workforce, saving money while employed is what builds the nest egg. But if you have outstanding debt, you may be wondering how to pay off debt and save for retirement. Fortunately, there is a way to do both at the same time using a debt consolidation mortgage.

How to Use a to Pay Off Debt and Save for Retirement

Reduce Your Interest Rate

A debt consolidation mortgage can be either a brand new lien in the form of a cash out refinance, or as a second lien as an equity loan. With either option, the goal is the same: to consolidate debt into one new balance and pay it off with a lower interest mortgage. In this case, it’s a consolidation loan.

Credit cards and installment loans in general will have much higher interest rates compared to what you can get with an equity loan. Even those with the best of credit can’t get an interest rate on a credit card lower than what a mortgage will offer. Getting rid of these high-interest debts is the first step to pay off your debt and save for retirement.

Calculate Your Payments

To start, make a list of all your credit accounts, balances and the interest rates. Now, add up the total debt and total monthly payments. Next, get a quote from  Homesite Mortgage about rates and terms for either a first or second loan. A first lien cash out refinance would replace the current mortgage with a new one. The new mortgage will also contain the outstanding credit card, automobile and student loan debt. The new monthly payment could be considerably lower than the outstanding credit card payments, installment loans and other lines of credit.

Take a look at how much you’d save with a debt consolidation mortgage each month. Use the debt consolidation calculator

Start Saving - Now Comes The Fun Part!

Now look at your current savings accounts, IRAs or 401(k) accounts. Let’s say that your debt consolidation mortgage reduced your monthly payments by $400. This is the extra amount you can put away in your nest egg. By saving this $400 each month, and gaining just 5% annually in interest or other gains, in just 15 years you’ll have amassed over $108,000 for retirement!  In 25 years your nest egg will have grown to over $240,000!!

You can allocate a specific amount to various savings accounts in addition to paying an extra amount each month toward your principal balance. In this way, you can pay off your debt and save for retirement easily, at the same time.

Avoid Credit Cards

The key here is to make sure those old credit card debts don’t begin to grow again, and to stay away from opening up new accounts. Credit cards have some of the highest interest rates of any debts, so it’s best to avoid these as much as possible.

If you find it difficult to pay off your credit cards each month, take a closer look at your spending and see what you can cut. If your spending is essential, reconsider your savings and spending arrangement. You won’t be able to pay off your debt and save for retirement if you can’t first make ends meet. If your spending isn’t essential, but it’s hard to resist the temptation of credit cards, consider putting your credit cards away to use only in emergencies, or closing the accounts all together.


Saving for retirement can seem impossible with high-interest debts hanging over your head, but it doesn’t have to. When you consolidate your debt, lower your interest rate, and carefully plan your savings, you can save for retirement while paying off your debts. To get started on a debt consolidation mortgage or to learn more, visit our debt consolidation mortgage page.

 try the debt consolidation calculator

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